Investment Philosophy

“We are convinced that the best strategy for investment success is by investing in high-quality, well-managed, but mispriced small-cap companies
and holding them for the long term.”

J. Sebastian van Berkom

 

We are looking for

  • Outstanding management team
  • Sustainable competitive advantages
  • Strong operating cash flows
  • High returns on capital
  • Stock trading below intrinsic value

We are fundamental bottom-up stock pickers. Our biggest source of advantage is the depth of knowledge we develop on our investment candidates.

 

General Guidelines

  • Between 40 to 60 stocks per mandate
  • 8-10 new names every year on average
  • Individual positions established at 1% to 3%; maximum weight of 7%
  • Maintain fully invested portfolios, with cash and equivalents below 5%

 

Risk Management

  • High-quality companies only
  • Focus and strict discipline on valuation
  • Investment in companies with a strong balance sheet
  • Avoid permanent value destruction of holdings in portfolios

 

Sector Risk

No more than 15% of the portfolio invested in businesses that are highly correlated with each other (from the same sub-sector)

 

Investment Strategy

Research

  •   Rigorous bottom-up, fundamental analysis on each investment candidate
  •   Research-intensive due diligence process focused on financial and qualitative attributes
  •   Approximately 100 to 150 one-on-one company meetings per year
  •   Every company in our portfolio contacted at least once per quarter

Conviction

  •   Portfolios built and concentrated on our best ideas
  •   Major driver of our significant outperformance versus our respective indices

Long-term Perspective

  •   Low annual stock turnover (between 20% and 25%)
  •   8 to 10 new names every year, leading to superior knowledge of each of our holdings in portfolios

 

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